[yummyfajitas]

This is completely backwards. The wealthy primarily invest their money; it is mainly spent on non-consumer goods (servers, backhoes, research, etc). If we redistribute to people with a higher propensity to spend, then we are shifting wealth from investment to consumption. This will raise demand for consumer goods, hence raising prices, and causing inflation.

Note that an increase in the speculative value of real estate is NOT inflation - inflation incorporates the cost of housing (rent or owner-equivalent rent), not the speculative value of land. Similarly, it's not inflation if FB or MS goes up.

By the way, if you believe that money going into the hands of the wealthy is the best way to cause inflation, it therefore follows that the best economic stimulus is tax cuts for the wealthy. Do you favor such cuts during times of recession?

[toomuchtodo]

> By the way, if you believe that money going into the hands of the wealthy is the best way to cause inflation, it therefore follows that the best economic stimulus is tax cuts for the wealthy. Do you favor such cuts during times of recession?

In a recession, you want to stoke demand. Inflation isn't a worry, deflation is. You therefore give tax cuts to the people who are going to spend (ie not the wealthy).

"Overall, tax cuts for the bottom 90% tend to result in more output, employment, consumption, and investment growth than equivalently sized tax cuts for the top 10% over a business cycle frequency."

http://www.forbes.com/sites/taxanalysts/2015/04/24/tax-cuts-...

[yummyfajitas]

Yes, that's the point I'm making - I'm disagreeing with this: "The point of taxing them is to mute the inflationary effect of letting them keep their money."

But if crdoconnor disagrees and also is logically consistent, he should also disagree with you. Somehow I suspect he won't.

Also, your understanding of Keynesian economics is slightly confused; the goal is to cause inflation in order to reduce real wages.

[crdoconnor]

>But if crdoconnor disagrees and also is logically consistent, he should also disagree with you.

Uh, no. It's entirely logically consistent to agree with him.

[crdoconnor]

>This is completely backwards. The wealthy primarily invest their money; it is mainly spent on non-consumer goods

Have you not noticed that these goods have experienced a considerable degree of price inflation over the last decade? Did houses get cheaper?

>Note that an increase in the speculative value of real estate is NOT inflation

Bullshit. If I'm spending more on rent or mortgage (which I will if property prices increase), I've experienced inflation just as much as if I'm spending more on milk, eggs and bread.

>By the way, if you believe that money going into the hands of the wealthy is the best way to cause inflation, it therefore follows that the best economic stimulus is tax cuts for the wealthy.

Depends on whose economy you are stimulating. If you just want to stimulate the price of property and stock prices, sure, tax cuts for the wealthy all round. If you want to stimulate employment for the middle classes, not so much.

If you want to stimulate general economic growth, tax cuts for the rich are awful because there is a very minimal multiplier effect. The money goes into real estate and the stock market and largely stays there.

The best way to do that is to offer a job guarantee like FDR did in the 30s or increasing the minimum wage. The spending multiplier on both of those is about 3-5.

>Do you favor such cuts during times of recession?

Clearly not.

[yummyfajitas]

Rent increases are inflation, house price increases are not. Similarly, burrito price increases are inflation but chipotle share price is not. Please, understand inflation and cpi before opining on it. Also google it - inflation has been very low over the past decade.

(In fact, its my belief that we've had deflation for a while, since I believe cpi is considerably overstated. The biggest driver of inflation is health care, which is not hedonically adjusted.)

According to you, money in the hands of the poor has a higher multiplier (I.e. causes more inflation) than money in the hands of the rich. How does that not contradict your previous post? In whose hands does money cause the most inflation, the poor or the rich?

Also, your ideas about stimulating different parts of the economy are pretty explicitly not Keynesian.

[SamReidHughes]

Speculative property price increases won't cause an increase to rent, that's a function of what prices the market will pay for housing at particular levels of quality. It might cause somebody who'd buy a home to decide to rent instead, but remember that somebody else is currently occupying that home (or better yet, renting it out). In areas with room for development, speculative price increases on housing will make it profitable to build more housing, which will lower rents (i.e. make them rise less quickly).

Note that property price increases are often associated with increases in rent, but they don't cause the increases -- rent increases is caused by influxes of population, decreases in the population's price sensitivity, etc. Property price increases are caused by the same thing, and speculative property price increases are caused by (among other things) expectations of that sort of thing.

The big difference between houses and milk is that houses are durable goods which don't completely depreciate.